Investors remained cautious ahead of the ECB meeting and the EU summit. There were mixed opinions on whether the summit would be a fruitful one. A report said that an unnamed senior German official stated that 'we are now more pessimistic than last week over a significant summit deal'. Yet, France pledged to secure a 'powerful' deal. The ECB is expected to cut the main refinancing by at least -25 bps. It is also likely to extend 2-year loans to banks and widen the range of acceptable collateral. Financial markets traded without direction. Wall Street edged higher with DJIA and S&P adding +0.38% and +0.20% respectively. In the commodity sector, crude oil prices slumped but remained within recent range while gold rose for a second consecutive day.

Germany poured cold water ahead of the awaited EU summit as an official told the media that he had 'the impression that a number of actors have not yet understood the seriousness of the situation'. Several issues are on the agenda of the Friday meeting. Some members suggested doubling the firepower of the EFSF, allowing it to function temporary with the ESM which is expected to begin mid -2012 and will eventually replace the EFSF. However, the idea was opposed by Germany. Other alternatives are to morph the ESM into a bank or to funnel EU funds to the IMF.

The ECB will be meeting in European session today. It's widely expected that President Draghi will announce a rate cut of at least -25 bps together with a set of stimulus measures. Besides rate cut, the central bank is expected to announce additional 12-month LTROs for 1Q12 and possibly 2Q12. It is also expected that the ECB would widen collaterals acceptable for borrowing money from the central bank. The BOE will have meeting today but it's expected that no change will be announced.

In the US, initially claims probably fell -6 points to 396K in the week ended December 3. Wholesale inventories might have risen +0.3% m/m in October after slipping -0.1% in the prior month. Canada's new housing price index probably climbed another +0.2% m/m in October while housing starts might have fallen to 200.0K in November from 207.6K a month ago. The BOC announced to leave the overnight rate at 1% although global economic outlook has deteriorated sharply and the outlook of European sovereign debt problems remained uncertain. Although policymakers expected the recession in Europe will be 'more pronounced', recent economic data showing stronger-than-expected US economic activities in would lend support to Canada's growth. There have no signs of monetary easing but the central bank would probably keep interest rates at ultra low levels for some time.